Managerial Issues in International Business Edited by Felicia M. Fai and Eleanor J. Morgan Managerial Issues in International Business THE ACADEMY OF INTERNATIONAL BUSINESS Published in association with the UK Chapter of the Academy of International Business Titles already published in the series: International Business and Europe in Transition (Volume 1) Edited by Fred Burton, Mo Yamin and Stephen Young Internationalisation Strategies (Volume 2) Edited by George Chryssochoidis, Carla Millar and Jeremy Clegg The Strategy and Organization of International Business (Volume 3) Edited by Peter Buckley, Fred Burton and Hafiz Mirza Internationalization: Process, Context and Markets (Volume 4) Edited by Graham Hooley, Ray Loveridge and David Wilson International Business Organization (Volume 5) Edited by Fred Burton, Malcolm Chapman and Adam Cross International Business: Emerging Issues and Emerging Markets (Volume 6) Edited by Carla C.J.M. Millar, Robert M. Grant and Chong Ju Choi International Business: European Dimensions (Volume 7) Edited by Michael D. Hughes and James H. Taggart Multinationals in a New Era: International Strategy and Management (Volume 8) Edited by James H. Taggart, Maureen Berry and Michael McDermott International Business (Volume 9) Edited by Frank McDonald, Heinz Tüselmann and Colin Wheeler Internationalization: Firm Strategies and Management (Volume 10) Edited by Colin Wheeler, Frank McDonald and Irene Greaves The Process of Internationalization (Volume 11) Edited by Frank McDonald, Michael Mayer and Trevor Buck International Business in an Enlarging Europe (Volume 12) Edited by Trevor Morrow, Sharon Loane, Jim Bell and Colin Wheeler Managerial Issues in International Business (Volume 13) Edited by Felicia M. Fai and Eleanor J. Morgan Managerial Issues in International Business Edited by Felicia M. Fai and Eleanor J. Morgan School of Management, University of Bath, UK Selection and editorial matter © Felicia M. Fai and Eleanor J. Morgan 2006 Foreword © Jeremy Clegg 2006 Individual chapters © the contributors 2006 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1T 4LP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2006 by PALGRAVE MACMILLAN Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y. 10010 Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin’s Press, LLC and of Palgrave Macmillan Ltd. Macmillan® is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN-13: 978–0–230–00193–0 hardback ISBN-10: 0–230–00193–9 hardback This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Academy of International Business. UK Chapter. Conference (32nd:2005:University of Bath, School of Management) Managerial issues in international business/edited by Felicia M. Fai & Eleanor J. Morgan. p. cm. — (Academy of International Business) Selection of papers from the 32nd Annual Conference of the UK Chapter of the Academy of International Business, held April 8–9, 2005 at University of Bath, School of Management. Includes bibliographical references and index. ISBN 0–230–00193–9 1. International business enterprises—Management—Congresses. I. Fai, Felicia M., 1971– II. Morgan, Eleanor J. III. Title. IV. Academy of International Business (Series) (Palgrave Macmillan (Firm)) HD62.4.A223 2005 658′.049—dc22 2005057504 10 9 8 7 6 5 4 3 2 1 15 14 13 12 11 10 09 08 07 06 Printed and bound in Great Britain by Antony Rowe Ltd, Chippenham and Eastbourne Contents List of Tables vii List of Figures viii Foreword by Jeremy Clegg ix Notes on the Contributors xi 1 Managerial Issues in International Business: Introduction 1 Felicia M. Fai and Eleanor J. Morgan 2 The Relevance of Internationalization Theories: a Contingency Framework 9 Carl Arthur Solberg and Vidar Askeland 3 Cheating and Incentive Schemes in International Joint Ventures 33 Ursula F. Ott 4 Managerial Perspectives on Business Purpose: Values, National Values and Institutions 50 Simon Harris and Chris Carr 5 A New Perspective on Parenting Spin-offs for Cluster Formation 67 Manuel P. Ferreira, William Hesterly and Ana Teresa Tavares 6 Towards an Explanation of MNE FDI in the City of London Financial Services Cluster 85 Naresh R. Pandit, Gary A.S. Cook and Pervez N. Ghauri 7 International Entrepreneurship and Managing Network Dynamics: SMEs in the UK Advertising Sector 102 Dev K. Boojihawon 8 Cross-border Management Issues in International Law Firms 123 Susan Segal-Horn and Alison Dean 9 The Performance Management–Training Interface in Australian Firms in China 141 Susan McGrath-Champ and Xiaohua Yang v vi Contents 10 Country of Origin Effects on Knowledge Transfers from MNEs to their Chinese Suppliers: an Exploratory Investigation 162 Jing-Lin Duanmu 11 Foreign Direct Investment Flows into an Integrating Europe: MNE Strategy and Location Decisions, 1981–2001 180 Dimitra Dimitropoulou and Robert Pearce 12 New Directions in International Business 195 Simon Collinson, Peter Buckley, John Dunning and George Yip Index 208 List of Tables 3.1 Definitions of cheating, broadly defined, and examples 36 3.2 Corruption perception index (CPI) and bribe payer’s index (BPI) 39 3.3 Cheating at work in relation to Hofstede’s dimensions 40 3.4 Sabotage and learning 47 4.1 National values orientations and expectations for stakeholders, aims and time frames in six nations 54 4.2 Congruence between national values and case study observations 62 6.1 General advantages of a City of London location 93 6.2 The importance of close proximity to other firms 95 8.1 The seven managerial challenges 129 9.1 Company profiles 149 9.2 Expatriate profiles 150 9.3 Performance management (PM) components 156 10.1 Composition of firms interviewed 168 11.1 FDI inflows by origin; number of observations in each panel 184 11.2 Regression results, one-way FE and POLS 188 12.1 Multidimensional framework for investigating broad themes – an example 202 vii List of Figures 2.1 Framework for classifying internationalization theories 10 2.2 Trajectories of case firms within the framework 20 3.1 Power distance in relation to individualism and masculinity 39 4.1 Broad analytical model of factors underlying strategic decisions 53 6.1 The London financial services cluster 89 7.1 International entrepreneurship and network dynamics: a conceptual framework 108 7.2 AccentUK 112 7.3 Contactpoint 114 7.4 Finewaters 116 9.1 Model of cross-cultural training and performance management 147 10.1 Knowledge transfer intensity and relationship development 169 12.1 Rigour and relevance in international business 196 viii Foreword This is the thirteenth volume to be published by Palgrave Macmillan in the series of selected papers from the annual conference of the Academy of Inter- national Business (AIB), United Kingdom Chapter. The 32nd Annual Conference, on which this volume is based, was held at the School of Management, University of Bath on Friday 8 and Saturday 9 April 2005, organized by the joint conference chairs, Eleanor Morgan and Felicia Fai. The conference achieved a new record in terms of the number of submissions and in terms of the overall quality of papers presented: 79 papers were accepted for the conference sessions and 24 students presented their research to panels of experts at the doctoral colloquium. The study of international business in the UK has, rather fittingly, become increasingly international in recent years. This was clearly evident at the Bath conference, where there were over 170 participants, of which 58 delegates (staff and research students) came from academic institutions in 21 countries outside the UK; indeed the challenges faced by those involved in international business, whether as academics or as practitioners, are universal. John Dunning, in a powerful contribution at the conference, highlighted ways in which international business links to the major economic and welfare challenges faced in the world. In drawing this volume together, the editors have focused on managerial issues; each of the chapters connects to these challenges in some way, while addressing issues that affect management in the process of wealth creation. Research in the field of international business is conducted on a number of levels, from the micro to the macro. As international business comes to occupy a progressively greater role in the creation of wealth, so its impacts and potential impacts on social and welfare issues necessarily become greater. Thus, cultural difference matters within multinational firms as well as between countries, for business as well as economic performance and development. The interna- tionalization of industries that customarily have been domestically focused, notably the service industries, is important for growth. The quality of entre- preneurship and management is critical for the performance of these firms and the countries that they unite through their activities. Issues such as these, and many more, are investigated in this stimulating volume arising from an outstanding conference. A further selection of the best papers from the conference will be published in a special issue of Management International ix